Europe’s benchmark gas price touches €100 per megawatt-hour

Europe’s benchmark natural gas contract touched €100 per megawatt-hour on October 28 for the first time since December 2022. The report linked the rise to disruptions to Middle East shipping.^[1]

A megawatt-hour measures energy and equals 1,000 kilowatt-hours. The report establishes that the price touched this level during trading; it provides no closing price.^[1]

Liquefied natural gas, or LNG, is gas cooled into liquid form for transport by ship. Shipping disruptions can restrict access to supplies, making buyers that need replacement gas compete for cargoes that can still be delivered and pushing prices higher.^[1]

If elevated prices persist, businesses can face higher costs as existing purchase contracts expire or they need additional gas. Gas-dependent factories and gas-fired power producers then have to raise selling prices, accept lower margins or reduce production; the impact depends on how much of their purchasing price is already locked in and whether they can pass costs to customers.^[1]

Impact

• Gas-intensive European manufacturingRisk

  Fertilizer, chemical and glass producers use gas as a feedstock or source of heat. Businesses without locked-in gas prices may need to raise prices or cut production, especially where customers resist paying more.^[1]

• European power supplyRisk

  Gas-fired generators may pay more to replenish fuel. Those able to pass the cost through electricity prices have a buffer; those selling power at fixed prices without locked-in fuel costs face margin pressure.^[1]

• LNG suppliersOpportunity

  Suppliers, including US exporters, with deliverable cargoes priced at market rates may earn more revenue. Gains depend on shipping access and contract pricing; volumes committed at fixed prices have limited upside.^[1]